European bank loans ST $470 million

LONDON – The European Investment Bank (EIB) has signed a 350 million euro (about $470 million) loan contract with STMicroelectronics NV in support of the company's industrial and R&D concerning next-generation semiconductor circuits.

The EIB is the bank of the European Union. Its remit is to provide mainly long-term loans to support viable private or public investment projects that realise the objectives of EU integration, cohesion and development.

The loan to STMicroelectronics represents a new stage in the financing of Europe’s competitiveness, the EIB said in statement.

The EIB expects ST to use the loan to create competitive technologies for the digital economy including mobile convergence of multimedia, communications and computing, which it calls digital nomadism. Another priority is the reduction of power consumption and improvement of energy efficiency within IT and telecommunications equipment.

The loan is intended to cover a full development cycle from research to design that will be conducted at ST's sites in Rousset, Crolles, Grenoble and Tours (France). The earmarked research includes developing mobile applications based on the use of autonomous fuel cells. As well as IT and telecoms, the industrial and automotive sectors are expected to be major beneficiaries.

In 2009 the EIB handed out nearly 1.4 billion euro (about $1.9 billion) in loans to try and foster a knowledge-based economy in France. In 2009, in the wake of the economic crisis, the EIB granted loans totaling 79 billion euro (about $100 billion) to businesses and local authorities within and outside the European Union.

For those who feel like spreading rumors about European deposit insurance, please do. But at least have some sense about what it would entail. European banks already have the highest loan-to-deposit loan-to-deposit ratio in the world. This means they are massively more levered, roughly 3x more, the US banks. In other words, deposit "encumbrance" is already absolutely maxed out.
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The story revolves around the loan, but is there any information as to whether or not ST sought private financing and on what terms? I would agree that if they could get the government to do the loan, the terms would be less onerous on them.
If the loan was the last resort for ST, that is one thing. But if the loan was the first stop, that is an entirely different thing.
Any taxpayer in any country would not want government loans to private companies as the first finance option to become standard operating procedure. What government can grant, they can take away...or worse yet...try to control. That alone would encourage reputable business leaders to leave and go elsewhere.

ST is doing just what has come to be SOP, give us money or we leave. It works in the US, At least it's a loan and not a subsidy, not that a loan is any more likely to be paid back then a subsidy, although it does sound better.

The EIB should think of a better term than digital nomadism to describe what it wants done. Nomadism implies aimlessness. NXP had a better term for this which was Ambient Technology. At any rate, government stimulus can be positive if it has appropriate and timely milestone accomplishments. There are good examples of successful interventions by European multi-state organizations like Airbus Industries success in aerospace. Also it is inevitable that some hiccups occur in some companies execution as technology shifts and personnel changeovers occur. The challenge is how quickly you work on the right products with the right focus and creativity and without distractions.

Government have no other options than to give loans or stimulus packages to companies either for the stability of the economy or to keep their industry competitive in this age of globalization. Jobs will eventually move away to cheaper locations or to locations of the skilled workforce. I have noticed a hugh effort from EU to attract skilled workforce from Asia in recent past. In these troubled times, US is actually blocking skill workforce to enter the country while Europe is opening its boundaries. Let's see how it levels the play.

I totally agree with the argument that why is tax payers money being spent on private companies ? Private companies should raise their own funding be it for R&D or for anything else. With so many major playes in the IC industry its hard to bet on any single company.

ST still has some products going for it and if they don't catch up fast with others like TI, Broadcom, PMC, etc then it's bad for Europe where they have considerable presence. I am not against Govt loans to private firms but they should be done with diligence. I hope ST can somehow pull through these bad times.
I admit they became complacent last couple of years it's a wake up call. They had some really interesting products in the pipeline with embedded graphics, wonder how it's shaping up.

ST is paying back its faulty decisions. They have spent tremendous amount of money to create joint ventures, acquisitions indeed it was not necessary to do so. Paying lots of money to NXP to create a new JV was not worth to do for example. We can see results easily with ST/Ericssons current situation. Meanwhile ST forgot or skipped to focus more on R&D, yes they are leader at MEMS but lost huge amount of the cake to competitors.
I, as person who is located at EU, wonder why the taxes that i pay, is going to cover faults of such managers/companies. Protecting europian companies is okey, however why we have to pay to "poor" workers of nxp, or R&D costs of ST, who for sure is going to move some of its business units to asia anyhow. I would say EU parliment members should focus more on how to create jobs, cover damages of economic downturn. Its for sure same for US either.